)
The government has decided to exempt private companies, from seeking shareholder approval for its related-party transactions (RPTs) and relaxed norms related to deposit-taking, rights issue and ESOPs under the Companies Act, 2013.
Similarly, in separate notifications by the ministry of corporate affairs (MCA), government companies exempted public sector entities from managerial remuneration restrictions under the Act.
Besides, charitable companies and nidhis (mutual benefit loan societies) have also been exempted from various provisions of the Act.
| TWEAKED COMPANIES ACT |
|
According to one such notification, all the restrictions and rigorous approval requirements concerning RPTs would not be applied to private companies or their associate companies. The restriction on a related party to vote on such a special resolution and to approve any contract or arrangement which may be entered into by the company has been removed in the case of private companies.
"It is worth citing that none of these exemptions and relaxations would hamper the interest of the investors or public at large, as they cover only private companies with no or low public interest," said Yogesh Sharma, partner, Grant Thornton India LLP.
These exemptions have been notified almost a year after the draft notification for doing so was issued, in June last year.
In another relief, private companies would now be able to issue employee stock ownership plans (ESOPs) with an ordinary resolution, which requires only 50 per cent approval of shareholders. Earlier, such a step required a special resolution, which requires 75 per cent approval.
Moreover, private companies would now be able to make a rights issue with 90 per cent shareholder approval. The earlier provisions had some time limit set in this regard, held to cause unnecessary procedural delay.
"Private companies have also been allowed to accept deposits from members without the requirement of offer circular and creation of deposit repayment reserves etc. Flexibility has also been provided in the types of share capital that can be issued by private companies," the ministry said in a press release.
Private companies not having any investment by corporates have been allowed to extend loans to directors subject to certain conditions. An interested private company director has been allowed to participate in board meeting after declaring his interest.
For government companies, the ministry has done away with limits on managerial remuneration as well as restrictions on the maximum number of directorships. Rules for disqualification of directors in certain cases have also been eased .
